Harvard Business Publishing is again pushing its balanced scorecard stuff, but under the misleading strap-line Strategy has never been more important. Don’t get me wrong – BSC is a much better tool for on-going performance management or for strategic initiatives than the crude finance-only metrics that too often dominate, but it’s a very long way short of being a strategic management. A few shortcomings:

Whilst the causal logic behind the 4 dimensions of a BSC or strategy map are plausible enough, there’s no mechanism to ensure that they are valid or that the chosen items and mechanisms are indeed the most important. So – like many other issues – what gets on the page relies too much on judgement.

Given this lack of rigour, the metrics chosen to track performance can also be ill-chosen.

There is no recognition of internal conflicts between different functions – it’s easy for the sales function to hit Green on its aims, whilst actually causing Red in service or profitability.

There is no protection against setting up objectives with unintended consequences or boom-and-bust outcomes … pushing up growth in revenues and profits, for example, whilst creating problems that make it impossible to continue doing so in the longer term.

There is nothing in the typical BSC about competitors, market conditions or other critical external factors.

Though BSCs may, with suitable care, be OK in their place – strategic management isn’t that place.

Comments

At a practical level, my experience is that BSC has also proven difficult to implement “on the ground” in terms of employees at every level understanding its application on an on-going basis. That may well be a consequence of poor implementation/ownership within the organisation, but that was nonetheless the outcome.